Diageo’s share price (LON:DGE) has fallen by almost -6.0 over the last week on concerns about the effect of tariffs on the group’s US sales.
Diageo’s share price has lost almost -6.0% over the last 5-days, however, the shares have perked up this morning, adding +1.25%.
Diageo released its H1 2025 trading update recently, which was a mixed bag.
Overall organic sales grew by 1.0% in a very difficult economic climate (outside of the USA) and concerns about the willingness of consumers to pay up for the firm’s high-end branded spirits.
Though for now at least there are no such qualms in its US business which saw increasing demand for Diageo brands such as Don Julio and Crown Royal.
Commenting on Diageo, after the half-year update, analysts at US investment bank Jeffries said they felt the company was in visible recovery mode, and that the new CFO was bringing a different approach to cost controls and cash returns.
The broker raised its organic sales growth estimate for 2025 from -0.30% to +1.10%, quite a revision.
However, it also cut its EPS forecast to 158 cents from 160. The broker had previously upgraded Diageo back in December.
There was no mention however of the possible sale of Guinness, which had been touted in some quarters after supply shortages during the Christmas holiday period.
Diageo has abandoned its mid-term guidance on concerns about visibility under Donald Trump’s tariff-led economic agenda.
The US accounts for 40.00% to 45.00% of the group’s sales and tariffs on UK products, such as Scotch whiskey, would be an issue for the distiller.
What’s more, Diageo owns spirits brands that are manufactured in Canada and Mexico, countries which have already been penalised by President Trump, even if the implementation of those tariffs has been delayed.
Diageo is to invest $415.0 million in a new manufacturing and warehousing facility in Montgomery Alabama, that is expected to be operational by the end of 2025.
Products made here would not attract tariffs and this could be one of the ways that the firm mitigates their impact.
Shareholders and the company will presumably hope for the best but plan for the worst ahead of any trade deal or change in trade terms between the UK and the US.
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